World Trade – What’s Happening in China?
When I was in Beijing in early September, the European Union announced a trade investigation against China for selling Solar Panels for less than the cost of manufacture. While the EU continues to seek to determine if in fact China “dumped” solar panels, the news reports (on the one English-speaking channel on the hotel TV) spent over 40 minutes discussing the negative impact on the already-slowing solar panel industry should the EU claims be true.
About 10 days later, the US decided to file a trade complaint with the World Trade Organization over China’s subsidized auto and auto parts exports. However, the Chinese attacked first by filing a complaint with the WTO over unfair duties the US has enacted on 30 different imports from China, including steel, paper and kitchen appliances. These accusations of subsidizing manufacturing and dumping export products is all part of tit-for-tat disputes which has been ratcheting up in recent years over the Chinese attitude which fails to protect US intellectual property. Despite a win in the Chinese courts by Ford Motor Company during the Summer of 2012, it is routine for the Chinese manufacturers to copy American-made goods, especially films and videos.
Then, at the end of September, headlines announced what was predicted and almost visible while I was in China — Chinese economic growth slowed for the 11th straight month. Granted, the economy is still growing (at what from a US perspective is) a health rate of 8.9% (as of August 2012), but is substantially down from a year earlier when the growth rate was 13.5%.
The slowing of manufacturing and economic growth in China will have implications far beyond the Chinese borders. Chinese growth requires inputs of commodities from around the world — countries like Brazil, Australia, South Africa, Russia, Venezuela and even the US are exporters of raw materials to China. At an anticipated Chinese growth rate of 6 to 7%, countries and companies around the world will need to adapt to a “new normal” (and lower) level of raw material exports to China.
It used to be said that when the US sneezes, the world catches a cold. The Chinese appear to be getting a bug which is giving the world influenza.
